Re: DSE 2006

Posted by Chinni18 on Jun 07, 2012; 6:16am
URL: http://discussion-forum.276.s1.nabble.com/DSE-2006-tp7577468p7577536.html

Q21
Examine (x1,y1)=(3,3) and x2,y2)=(7,2)
In market for x we need 3p1+3p2=5p2
We know p1=0 => 3p2 = 5p2 => No value of p2 satisfies this
So its not a competitive equilibrium.
But it is pareto efficient because you cannot make either of the agents better off without making the other one worse off.
Thus option (b)